BULLINK Portfolio: Earnings Surprises Await for Peak Season

1Q25 Review: Korea, China, and US Surprises

Kolmar Korea Exceeds Expectations

Kolmar Korea's financial performance for the first quarter of 2025 has surpassed market predictions. The company reported a revenue of KRW 653.1 billion, marking a 14% increase year-over-year, alongside an operating profit of KRW 59.9 billion, an impressive 85% surge from the previous year. The company's growth trajectory and efficiency in operations have been evident across key regions, including Korea, China, and the United States.

Domestic Sales Resurgence

In Korea, domestic sales soared to KRW 274.3 billion, recording an 11% rise year-over-year. The robust performance was primarily fueled by the success of sun care indie brands, which are proving to be significant outperformers in contrast to the declining legacy brands. With Q2 being the peak season for sun care products, increasing orders for key brands are anticipated. The shift in consumer preferences and enhanced product mix have notably pushed the operating margin to a record 12.4% for the first quarter.

Strong Recovery in China

China, which had been underperforming, has shown remarkable improvement with sales hitting KRW 41.6 billion, a 20% year-over-year increase, and an operating profit of KRW 3.1 billion, a 72% jump from last year, translating to an operating profit margin of 7.5%. Previously affected by pricing negotiations, the outlook for sun care orders is optimistic, indicating a continuation of this growth momentum.

US Market Continues to Flourish

The US market story remains compelling, with sales skyrocketing by 210% year-over-year to KRW 21.7 billion and a positive operating profit of KRW 1.5 billion. The growth trajectory has been fueled by sustained demand from key customers, the introduction of new products, and the acquisition of new base makeup clients. This market has displayed stable profitability for two consecutive quarters.

Earnings and Valuation Outlook

The stock's trajectory is bolstered by significant momentum in sun care products and favorable valuations in the US market. As we head into the peak season for sun care, the order book remains strong, and Q2 is projected to set new domestic margin records. The construction of a second US plant, slated for completion in June, reinforces the growth outlook. Active discussions with several brands for local production following new tariff policies hint at further market penetration and revenue increases. As a result, the 2025 U.S. revenue guidance has been adjusted from KRW 80 billion to KRW 90 billion.

Given these upward revisions, we have elevated our price target from KRW 92,000 to KRW 110,000, supported by improved estimates (25F domestic operating margin at 12.5%) and increased valuation multiples. Currently trading at 14 times the forward 12-month price-to-earnings ratio, Kolmar Korea presents an attractive investment opportunity. We maintain our 'Buy' recommendation.

Example Scenario:

Imagine a tech company operating in AI solutions surpassing expectations globally. In the US, sales double due to new government contracts, while in Asia, cultural integrations with AI models boost user engagement by 30%. Operating margins reach an all-time high with the release of an innovative AI interface. With plans for expansion and strategic collaborations on the horizon, the company revises financial forecasts upwards, resulting in increased target valuations. This mirrors Kolmar Korea’s story of strategic global growth, robust domestic performance, and significant market expansion initiatives.